AFTER FURLOUGH FROM A DIFFERENT PLACE INTRODUCTION: OUR RESTRUCTURING OFFER MALCOLM ROBERTSON Founding partner It will be important in these instances for administrators and companies themselves to think carefully about the various stakeholders, what is said As policymakers attempt to breathe life into our mothballed economy to them, how it is said and when. over the next few months, while simultaneously withdrawing some of the critical life-support measures implemented at the beginning of this crisis In this paper, we consider the economic context now and in the period and gearing up for a yet undetermined Brexit in the new year, many ahead, and offer some more practical guidance to those taking difficult companies will, sadly, fail or be forced to shrink in size. decisions on how to do so sensitively, with an eye on reputation and public standing in the long run, and having learned from companies and Given the scale of the government and central bank intervention in the institutions that have performed well, and those that have not. economy, and the enduring shadow cast across public life by Covid-19, greater scrutiny will be applied to these events than might otherwise have Importantly, we also give some thought to the cultural issues that may been the case. emerge over time as the dust settles on what will be a defining crisis in many ways. Politicians and the media will shine bright lights on those companies (and those who lead them) that took public money and which either failed or We are here to help across the board and our senior team of advisers has made large numbers of people redundant. Equally, companies that chose an excellent blend of experience and composure in handling the most not to take public support and found themselves in trouble will be difficult company events and circumstances. Please get in touch if you expected to publicly justify decisions taken. think we can help. AFTER FURLOUGH 2 ECONOMIC CONTEXT FROM A DIFFERENT PLACE ECONOMIC CONTEXT: FALLING INTO THE FALL ANDREW WILSON Founding partner September and October are big months. In any year, the onset of autumn or fall marks a time of reset in the world. It brings an end to the seasons of growth and the beginning of winter. In good times, the harvest delivers the fruits of labour and provides resilience for the cold months that lie ahead. However, this year is like no other, especially for the UK economy. According to the OECD, the UK economy will take the biggest hit from Covid-19 in the industrialised world and will perform almost twice as badly as the average for its 37 member countries. This is before the full impact is This will also impose a new border between Britain and Ireland with felt from whatever arrangement is agreed for the trading relationship arrangements for Northern Ireland that, again, remain uncertain. In its between the UK and the European Union, as a border to the east is initial analysis of the economic price of the health crisis the OECD called for created and we leave the customs union and single market in January on the UK to delay its exit from the single market because businesses would terms that should be agreed – or not – by the end of October. struggle to cope with the twin pressures of Covid-19 and the detail of Brexit. AFTER FURLOUGH 4 ECONOMIC CONTEXT: THE WITHDRAWAL OF LIFE SUPPORT DURATION OF COVID-19 SUPPORT SCHEMES IN THE UK And alongside these macro-economic challenges is the reality that the UK government is beginning to flick the off switch across a range of ‘life support schemes’, starting in September and concluding by the end of October. So with the economy already falling, Brexit pending and the government’s economic support schemes coming to an end, this fall will take on an extra potency. For the economy of the United Kingdom, winter has started early and it could be a harsh one. AFTER FURLOUGH 5 ECONOMIC CONTEXT As these charts show, the economic impact of Covid-19 has varied in its Consumer spending in March 2020, by sector intensity between different businesses and sectors. The position is stark for some whose businesses have closed more comprehensively and for longer and for whose products consumer demand has contracted even as their supply to market opens again. Average turnover shock applied by sector and subsector in 2020 Q2 Source: Bank of England On the face of it, this will present business leaders with an extremely difficult strategic challenge: to choose between holding tight, cutting costs, closing elements altogether and investing where they judge a viable future opportunity may lie. Managing the implications of those choices for Source: Bank of England their own people well and appropriately has never been more important. AFTER FURLOUGH 6 DELIVERING DECISIONS FROM A DIFFERENT PLACE DELIVERING DECISIONS It is now inevitable that decisions, good and bad, will need to be made and then communicated in the weeks and months ahead. The future is infinitely longer than the present and the sustainability of your organisation may be put at risk by choices made in the eye of a storm. Whatever the outcome, customers, staff and stakeholders will want to know that every possible option was explored before difficult decisions were taken on jobs, terms and conditions, or the way you manage supply chains. This not only requires strong governance and good stewardship, but consistency and clarity. Honest, clear and comprehensive explanations of the rationale behind decisions are more advisable than platitudes. Crucially, empathy should permeate all messaging and there should be as little business jargon as possible in those communications. A sensitive approach is key. In terms of the practicalities, we offer some thoughts here on what a prudent checklist looks like. We are here to support you and your leadership teams, whatever it is you are preparing to say, and we can help guide you through every step of the process. This isn’t easy. Which is more reason to pause, reflect, and take advice on strategic direction and communication. AFTER FURLOUGH 8 CHECKLIST CHOREOGRAPHY KEY MESSAGES It is likely that you will be communicating with many audiences at What are the most significant things you want to say? Be clear the same time – from your employees, government, investors and about the decisions taken, how you’ve reached them, the impact beyond. You should consider every channel available to you and they will have on your business now, and how you feel in doing so. pull together an appropriate and detailed plan, including Don’t worry about needing to refer to what you did or said before consideration of leaks to the media and others. The right actions, this crisis hit. People need to know what you are doing now and for the right reasons, communicated in the right order. how you are considering the future. EARLY WARNING COMPREHENSIVE Q&A Have you thought carefully about the stakeholders you Take the time to produce an exhaustive Q&A. Put yourself should engage before you make a public statement? For in the shoes of your stakeholders and think about what listed businesses, this is not always straightforward, but you would want to know if you were them. In doing so, taking people by surprise is never a good strategy. We you will be better prepared to answer the most difficult can work with you to identify stakeholders, internal and questions you are likely to face, not only from your external, who will likely comment on whatever employees but from a full range of other stakeholders. announcements you make. It is important that they do so The media, unsurprisingly, is scrutinising the conduct of from an informed perspective, to help temper criticism businesses and their leaders forensically during this and influence the wider public. period and those that are judged to have come up short are being called out. EMPLOYEE COMMUNICATIONS The health and wellbeing of your employees matters above all else TONE OF VOICE in this crisis and they should be engaged properly at all times. The importance of tone at this time cannot be overstated. As Leaders must be visible regularly and accessible in some cases to we’ve said before, this is a health crisis and a matter of life and employee groups and their representatives. Communication with death for us all. Talking purely from a business perspective is likely employees should happen at exactly the same time as public to provoke an aggressive reaction, so empathy becomes more statements are made, or beforehand in some circumstances. We important. It is not just what we say but how we say it. can advise on technology options for such engagement. AFTER FURLOUGH 9 INSIGHT: BALANCE IN THE FACE OF DIVERGENCE PAUL GRAY Consulting partner On the other hand, keeping the use of public transport low mitigates risk of virus transmission (albeit it substantially affects the economic model for some modes of public transport). Reduced vehicular traffic benefits the One challenge for employers who operate UK wide is the difference in environment and is safer for pedestrians and cyclists. stance between the UK government and the Scottish government on The views of individuals matter too. Some people have found home returning to the workplace. working more flexible, allowing them to have a better work life balance The UK government is taking a strong line – led by the prime minister – on and reducing their working day by removing unproductive travel time. the importance of people returning to their offices and places of work, Others have found it hard – difficulties in finding a quiet space to work, particularly for the benefit of the wider economy.